VISIT OF CHAIRMAN LANTOS TO HUNGARY, AUGUST 12-20,

UNCLAS BUDAPEST 001243 SIPDIS SENSITIVE SIPDIS DEPARTMENT FOR EUR/NCE AND H; PLEASE PASS TO CHAIRMAN LANTOS E.O. 12958: N/A TAGS: PGOV PREL ENRG HU SUBJECT: VISIT OF CHAIRMAN LANTOS TO HUNGARY, AUGUST 12-20, 2007 ¶1. (U) Embassy Budapest warmly welcomes the visit of Chairman Lantos to Hungary. SUMMER OF NO LOVE LOST ¶2. (SBU) Your trip comes as Hungarians takesa much-needed break after a year characterized by conflict over domestic politics and drift in foreign policy. ¶3. (SBU) Hungary is subject to many of the regional trends highlighted in your recent hearings on Central and Eastern Europe: frustration born of unrealistic expectations, fatigue with reform, and frequent resort to populist rhetoric. The PM is on the defensive personally and politically: the opposition continues to press him on all fronts, and he is increasingly embattled within the coalition and isolated even within his own MSZP. Despite pressure from the SzDSz on key initiatives including health care, energy security, and transparency, progress has largely stalled. Inside the government and out, many are criticizing the PM for combining the mistakes of a novice government with the exhaustion of a lame duck administration. ¶4. (SBU) This has been particularly evident in foreign affairs, where Gyurcsany's comments on key issues including Energy Security and Missile Defense have been ambiguous at best. The result has been a government that risks appearing as a "neutral ally." We are awaiting confirmation that you will have the opportunity to discuss these issues candidly and privately with the PM during your visit. FIDESZ: SAYING NO ... AND MAKING EYES ¶5. (SBU) By contrast, FIDESZ is working hard to repair its relationship with us. Whether through calculation or conviction, they have played the transatlantic card by aligning themselves with us on key issues. While other and more moderate voices are being heard within FIDESZ, it is still Orban's party. Although he has no immediate constitutional means to force Gyurcsany from office, the party will try to cast a referendum next spring as a de facto vote of confidence in the government. We're in touch with Orban's staff regarding a potential meeting during your time here. GETTING ATTENTION ¶6. (SBU) We continue to work hard to maintain good working relationships across the political spectrum and to keep the focus on the policy issues rather than the personal animosities. Trips by Charles Gati and Assistant Secretary Fried have helped reinforce our message, and the government knows that we are looking for clear statements and clearer actions to show their strategic commitment. GETTING RESULTS ¶7. (SBU) Few have been forthcoming, however, and the picture remains mixed. The PM's most recent steps - trips to Russia and reported interest in a questionable deal on energy with Ukraine - have underscored our concerns, while talk of a slight increase in defense spending and the MOD's aggressive press to host the C-17s of NATO Strategic Airlift Consortium at Papa Air Base (both issues we hope you can discuss in a meeting with DefMin Szekeres) are steps in the right direction. SEASONAL AFFECTIVE DISORDER ... ALL YEAR-ROUND ¶8. (SBU) The high coefficient of political friction has left the average Hungarian "grumbling all the way to Lake Balaton" amidst a historic heat wave. While the financial community continues to focus on the strength of the forint and the government's signal successes in reducing the deficit, serious concerns regarding both competitiveness and transparency remain. Hungary is largely standing still on reform and losing ground relative to its neighbors in the quest for economic growth and in terms of attractiveness to foreign investors. Politically, opinion leaders tell us they are "always pessimistic ... but finally correct" in their concern over the issues raised in your hearings: the extent of Hungary's integration into the transatlantic community, the maturity of its parties, and the flexibility of its institutions. ¶9. (U) We look forward to welcoming you in person. FOLEY